[dpiers]

Call it a scantily-clad short then. A share that is already lent out to a short seller should not be eligible to be lent out again for the same reason I can't get two mortgages to buy the same house - the underlying collateral would be owed to multiple parties.

[314]

This is not true. Party A has a contract that party B owes them a share - not the share that they originally loaned. The whole idea is for party B to buy a share later to balance the trade.

A better analogy to understand why short interest can rise above 100% is fractional reserve lending and the effect that it has on money supply.

[rokobobo]

A share is a share is a share. You can’t tell which one was loaned out and which one wasn’t. And it’s not used as collateral, money is posted as collateral instead.

[ZephyrBlu]

This is ok because all instances of borrowing the share don't need to be settled simultaneously.